Interest rate pass-through and monetary policy asymmetry: A journey into the Caucasian black box

This paper analyses the interest rate pass-through for five economies of the Caucasus Armenia, Azerbaijan, Georgia, Kazakhstan, and Russia. Employing an autoregressive distributed lag (ARDL) specification to monthly data, we find that the interest rate passthrough is systematically incomplete and sluggish, probably due to macroeconomic instability and a low degree of competition in the banking sector. It is not clear whether pass-through has improved over time and asymmetric adjustment is found to characterize the pass-through only occasionally. Overall, our results show a considerable degree of cross-country heterogeneity in the pass-through. (C) 2014 Elsevier Inc. All rights reserved.